12345678910111213141516171819202122232425262728This disposition is not designated for publication in the official reports.

1

Case No. C 09-3043 JF (HRL)ORDER GRANTING IN PART AND DENYING IN PART MOTION TO DISMISS, ETC.(JFEX1)

**E-Filed 4/22/2010**

IN THE UNITED STATES DISTRICT COURTFOR THE NORTHERN DISTRICT OF CALIFORNIASAN JOSE DIVISION

IN RE FACEBOOK PPC ADVERTISINGLITIGATIONCase Numbers 5:09-cv-03043-JF,5:09-cv-03519-JF, 5:09-cv-03430-JFORDER GRANTING IN PART AND

1

DENYING IN PART MOTION TODISMISS AND DENYING MOTIONTO STRIKE[re: document no. 46]Defendant moves to dismiss Plaintiffs’ complaint pursuant to Fed. R. Civ. P. 12(b)(6) for failure to state a claim upon which relief may be granted and to strike portions of the complaint pursuant to Fed. R. Civ. P. 12(f). The Court has considered the moving and responding papersand the oral argument of counsel presented at the hearing on March 5, 2010. For the reasonsdiscussed below, the motion to dismiss will be granted in part and denied in part, with leave toamend. The motion to strike will be denied.

I. BACKGROUND

This putative class action arises out of individual contracts between Defendant Facebook

PPC (“Defendant”) and Plaintiffs RootZoo, Inc., Matthew Smith, and Steven Price (collectively,“Plaintiffs”). Defendant operates a popular social networking website: www.facebook.com.Complaint ¶ 20. Plaintiffs individually entered into contracts with Defendant for advertising onthe website. Complaint ¶¶ 50, 60, and 69. Plaintiffs’ advertisements appeared alongsideDefendant’s social networking content. Complaint ¶ 24.To place an advertisement on Defendant’s website, a potential advertiser must select the budget for its advertising campaign and the pricing mechanism that will be used. Complaint ¶31. Defendant provides two options for paying for an advertising campaign: cost per click (“CPC”) or cost per thousand impressions (“CPM”). Complaint ¶ 29. Plaintiffs each enteredinto CPC contracts. Complaint ¶¶ 50, 61, and 69. From the web page that directs the potentialadvertiser to choose the budget and pricing options, Defendant provides links to other web pageson which Defendant makes representations that it will charge only for “legitimate clicks”.Complaint Ex. A. Such representations are found in Defendant’s “Help Center”, which containslinks to web pages entitled “Ads: Glossary of Ad Terms”, “Ads: Campaign Costs andBudgeting”, and “Ads: Advertising Credits and Coupons” (collectively, “the ExtrinsicEvidence”). Complaint Exhs. B-E.The “Ads: Glossary of Ad Terms” web page contains the following statement withrespect to “clicks”:We have a variety of measures in place to ensure that we only report and chargeadvertisers for

legitimate clicks

, and not clicks that come from automated programs, or clicks that may be repetitive, abusive, or otherwise inauthentic. Due to the proprietarynature of our technology, we’re not able to give you more specific information aboutthese systems.Complaint Ex. B (emphasis added). The “Ads: Glossary of Ad Terms” page also contains astatement that “CPC stands for Cost Per Click. If your ads are bid on a CPC basis, you will becharged when

users

click on your ads and visit your website.” Complaint Ex. C (emphasisadded). Finally, the complaint alleges that Defendant made additional public statementsindicating that it had taken measures to identify “suspicious” clicks. Complaint ¶ 46.An advertiser also must agree to Defendant’s Advertising Terms and Conditions (“theWritten Agreement”). Complaint ¶ 88. The Written Agreement includes the following

12345678910111213141516171819202122232425262728Plaintiffs dispute that the Disclaimer is present in their contracts. Complaint ¶ 3. In its

2

moving papers, Defendant provides copies of the Advertising Terms and Conditions in effect atthe times Plaintiffs agreed to advertise on Defendant’s website. The Advertising Terms andConditions contain the Disclaimer. Plaintiffs have not disputed the authenticity of thesedocuments, and their opposition papers respond to the Disclaimer as if it were included in their contracts.3

disclaimer:I [PLAINTIFF] UNDERSTAND THAT THIRD PARTIES MAY GENERATEIMPRESSIONS, CLICKS OR OTHER ACTIONS AFFECTING THE COST OF THEADVERTISING FOR FRAUDULENT OR IMPROPER PURPOSES, AND I ACCEPTTHE RISK OF ANY SUCH IMPRESSIONS, CLICKS, OR OTHER ACTIONS.FACEBOOK SHALL HAVE NO RESPONSIBILITY OR LIABILITY TO ME INCONNECTION WITH ANY THIRD PARTY CLICK FRAUD OR OTHER IMPROPER ACTIONS THAT MAY OCCUR Howitson Decl. Exhs. 1-2 at “Indemnification” section (“the Disclaimer”).

2

Plaintiffs allege they have been charged for “invalid clicks” and “fraudulent clicks”.Complaint ¶¶ 51, 63, and 71. The complaint attributes these clicks to “(a) technical problems;(b) system implementation errors; (c) various types of unintentional clicks; (d) incomplete clicksthat fail to open the advertiser’s web page; and (e) improperly recorded or unreadable clicksoriginating in some cases from an invalid proxy server or unknown browser types.” Complaint ¶4. The complaint describes “click fraud” as the “result of a competitor clicking on anadvertiser’s ad in order to drive up the cost of an ad or deplete the competitor’s budget for placing ads.” Complaint ¶ 36.Plaintiffs filed the instant action on July 7, 2009, seeking relief under California’s Unfair Competition Law (“UCL”), Cal. Bus. Prof. Code § 17200

et seq

.; remedies for breach of contractand the implied covenant of good faith and fair dealing; a judicial declaration of the rights andobligations of the parties under the subject contracts; and remedies for unjust enrichment.

I. MOTION TO DISMISSA.Legal standard

“Dismissal under Rule 12(b)(6) is appropriate only where the complaint lacks acognizable legal theory or sufficient facts to support a cognizable legal theory.”